History of the Telephone Tax and Campaigns

The federal excise tax on telephone service has been associated with war spending throughout most of its history. (See the History Timeline also.)

The first telephone tax — on toll calls only — was imposed in 1898 (the Spanish-American War era). It was repealed in 1902, but a tax on long distance calls was reinstated by the War Tax Revenue Act of 1914. This was repealed in 1916, but reimposed in 1917 along with other war taxes. Then it was repealed again in 1924 and reimposed again in 1932.

The first tax on local telephone service came during World War Ⅱ. The war brought a 25% tax on long distance calls and a 15% tax on local service. This tax was retained during the Korean War. The tax was reduced to 10% on all telephone service in 1954. In 1965 Congress approved a reduction of the phone tax to 3% and planned to phase it out entirely in 1969.

However, in 1966 the Johnson Administration needed money for the escalating war in Vietnam. Congress passed a special tax bill that included a reimposition of the 10% phone tax. Wilbur Mills, Chairman of the House Ways and Means Committee, explained during the floor debate that “it is Vietnam, and only the Vietnam operation, which makes this bill necessary.” The tax was extended in 1968 for two more years. In late 1970 another two-year extension was approved, but with the proviso that it be reduced by 1% each year thereafter and repealed entirely on January 1, 1982.

In January 1981 the tax was extended another year at 2%. The tax was due to expire on January 1, 1983, but instead jumped from 1% to 3% — the first increase since 1966! The 3% telephone tax was then scheduled to expire at the end of 1987, but was again extended, this time through 1990. During the 1980s phone tax income served the general treasury, but clearly it was needed to help offset the Reagan administration’s huge military buildup.

In 1990 instead of letting the tax expire, the 101st Congress extended it permanently at 3%, and this time with a new twist. Sponsors of the Act for Better Child Care seized the phone tax extension as a source of new funding for their programs (new sources being a requirement under Gramm-Rudman rules to reduce the federal deficit). The permanent phone tax was then attached to this bill and passed by Congress. Nevertheless, the phone tax revenues go into the general fund as they always have and in no way are earmarked for child care programs. Telephone taxes are available to the military in the same way as income taxes. War tax resisters continue to encourage telephone tax resistance; some groups redirect resisted phone taxes directly to childcare themselves.

From April 1966 through 2001 the total revenues from the federal excise tax on telephone service amounted to $89 billion. In 2001 alone, the telephone tax raised almost $6 billion, according to the IRS.

The federal excise tax on long distance telephone service was abolished on July 31, 2006, after the government lost five appellate decisions on cases brought by big corporations. Because the government and the IRS had continued to collect the tax after a number of these cases were lost, they were forced to offer refunds for the three previous years on 2006 tax forms. This refund program ended in 2012.

The federal excise tax no longer applies to any long distance, mixed-use phone service (like cell phones), flat rate phone service, or internet phone service. It is still applied on local-only telephone service. Congresspeople continue to introduce bills to repeal this final remnant of the telephone excise tax.

Telephone Tax Campaigns

The idea for not paying the telephone tax was suggested by Doris Sargent in a letter to the Peacemaker, April 2, 1966. Karl Meyer started promoting it around the Chicago area and suggested to New York activist Maris Cakars that it might make a good national campaign of the Committee for Nonviolent Action. Shortly afterwards the War Resisters League picked it up and began a national campaign to refuse payment of the telephone tax. WRL printed up cards that telephone tax resisters could enclose with their bill payment each month and produced the brochure “Hang Up On War,” first drafted by Karl Meyer. Telephone tax resistance grew to an estimated half million people by 1972.

Thousands of people have continued to resist paying the federal phone tax for decades. Since the Vietnam war, resisters have focused on the enormity of the military budget while social programs suffer, spending on nuclear weapons, and the costs of military interventions including in Latin America, the Middle East, and Kosovo.

The Iraq Pledge of Resistance, NWTRCC, and War Resisters League New England initiated a new Hang Up On War! campaign in 2003 as another way to oppose the invasion of Iraq and war in Afghanistan. While a specific campaign is no longer active, many activists still participate in telephone tax resistance. It is an action that anyone can take whose phone bill includes the federal tax.